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Caveats follow VT spending review

DAVE GRAM
Published 5:25 p.m. ET April 14, 2015

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Gov. Peter Shumlin speaks at a news conference at the Statehouse in Montpelier on Tuesday. State spending as a share of the gross state product went from 11.5 percent in fiscal 2007, under Republican Gov. Jim Douglas, to a projected 10.9 percent in fiscal 2016, under Democratic Gov. Peter Shumlin, according to data from the Legislature’s nonpartisan Joint Fiscal Office.(Photo: GLENN RUSSELL/FREE PRESS)Buy Photo

MONTPELIER – A Montpelier think tank has seized on a recent analysis from the Vermont Legislature’s nonpartisan Joint Fiscal Office to argue that the state has more capacity to raise taxes than it is using.

But JFO data trumpeted by the Public Assets Institute has been getting a cool reception from the Shumlin administration and legislative leaders, and on Tuesday, the office issued a follow-up memo listing caveats that should be kept in mind by anyone looking at the numbers.

The memo followed a set of bar charts the Joint Fiscal Office released earlier this month showing that, despite widespread concern that state spending had grown faster than Vermont’s economy in recent years, state spending as a share of gross state product actually was trending downward during the past decade.

Tuesday’s memo put on display the tightrope act the Joint Fiscal Office must perform as it maintains the respect and credibility it is widely accorded by lawmakers, administration officials and others of all political stripes.

“The nonpartisan Joint Fiscal Office does not advocate using the comparisons to justify or challenge spending decisions. How one interprets the ratio of state spending to GSP is largely a political choice,” the memo stated.

In a blog post last week and an op-ed column by Public Assets’ Jack Hoffman, the group argued that the data raised big questions about what has become a Statehouse mantra in recent months: Vermont doesn’t have a revenue problem; it has a spending problem.

State spending as a share of the gross state product — a measure of the overall economy — went from 11.5 percent in fiscal 2007, under Republican Gov. Jim Douglas, to a projected 10.9 percent in fiscal 2016, under Democratic Gov. Peter Shumlin, the JFO data showed.

That 0.6 percent change translates to nearly $200 million, Hoffman said, considerably more than the $113 million budget gap lawmakers have been struggling to close this year with program cuts and tax increases.

Tuesday’s memo, which the director of the Joint Fiscal Office, Stephen Klein, said was requested by a lawmaker he declined to name, contained some cautions.

The projected 2015 and 2016 growth rates for state revenues and for gross state product were based on estimates by economists who advise the administration and Legislature. Spending projections do not include the costs for Lake Champlain cleanup and health care bills pending in the Legislature, it noted.

At a news conference Tuesday, Shumlin argued that gross state product is not the best measure against which to compare state spending. He said “gross state income” would be better, adding that many Vermonters have told them their incomes have been stagnant while costs have climbed.

The Joint Fiscal Office data showed state spending declining as a percentage of total personal income from 12 percent in fiscal 2007 to a projected 11.3 percent in fiscal 2016.